It’s Financial Literacy Month! Yes, a whole month dedicated to bringing awareness to financial education. Just some brief history, originally it was launched as Youth Financial Literacy Day by the National Endowment for Financial Education but in 2000, the initiative was passed on to Jump$tart Coalition who launched Financial Literacy for Youth Month. In 2004, the Senate recognized April as Financial Literacy Month.
So what exactly is Financial Literacy?
Financial literacy focuses on budgeting, saving, and just overall finance management. And being educated on these things is a sure way to secure the bag. Below are some tips on how to stay on top of your finances.
Balling on a Budget
A great way to manage your funds is to budget. This means setting aside a specified amount of money for your expenses and not exceeding that amount and making smart financial decisions. Staying disciplined and living within your means is essential to budgeting —it is easier said than done, though. Sometimes things come up that you weren't expecting BUT the key is to include that in your budget as well.
Try using the 50/30/20 rule when creating your budget. 50% of your income should go towards needs, 30% of your income goes to wants, and 20% goes to savings and debt repayment.
Here are some budget categories to get you started:
- Rent – Check our our apartment budgeting tips
- Day Care
- Insurance (auto, renters, etc)
- Credit Cards/Loan/Debt – undebt it is a great tool to help pay off your debt using the snowball or avalanche method
- Pet Care
- Transportation (uber, lyft, trains, buses, etc)
There are budgeting apps that you can use such as mint, digit, pocketguard, or wally. An excel or google sheet also works well to track!
Open a Savings Account
Within the budget that you set, you want to allocate some of your income to your savings account. Where some people have trouble is they set up a savings account that is a bit too accessible, meaning they can transfer funds over to their checkings account in an instant. While that is convenient, it is not suggested. Some banks even will convert your savings into a second checkings account if they notice that you withdraw from your savings too frequently. The trick is to kinda forget your savings exist. Let the money stack and try not to withdraw unless it is absolutely necessary to do so. A great thing to do this is to set up auto-transfer to your savings. By setting up auto-transfer you are able to save without even noticing. Not to mention, your savings will also gain interest over time.
Remember, Savings = long-term financial goals.
Investing often comes up in conversation when speaking on financial literacy because it focuses on setting you up for financial success in the long run. Everyone wants to be able to retire and relax on a beach somewhere in the islands but your financial choices today will determine your next 10, 20, or 30 years. You may also want to consider investing in additional avenues such as real estate, stocks, businesses, etc but a retirement plan is a must! There are different retirement accounts; Roth IRA, traditional IRA, and 401(k). Check out this resource for more information on retirement planning.
Overall, having good cash flow management, spending within your means, making small financial decisions is how to stay financial literate.